Innovative Strategies Spark Rebound Of Capsuled Items

U.S.A. - It hasn't been an easy 12 months for bulk vending. First, the controversy surrounding lead levels in toy fashion accessories prompted the largest product recall in U.S. history. Then, steadily rising oil prices hit the industry with cost increases that impacted everything from capsules and plastic products to shipping charges and route overhead. Finally, just when it seemed that things couldn't get any worse, they started to get better. The optimists, as it turned out, were right.

Now, as the industry continues to emerge from uncertainty and financial set backs associated with the lead issue, suppliers are fielding new lines of products that fill the gap left by the recalled merchandise. These new products address the needs of the toy fashion accessory market either through non-metallic design or meet (if not exceed) the guidelines set down by the Consumer Products Safety Commission.

"I think we are starting to see the market turn around," said A&A Global Industries' Phil Brilliant. "There generally seems to be an excitement about product we didn't see before the National Bulk Vendors Association show in Jacksonville. In addition to translating into larger initial sales, our customers are experiencing sell-through at the machines.

"For our company," Brilliant continued, "the strategy has been to offer a lot of licensed products in addition to a new generation of toy fashion accessories that are non-metallic, such as our 'Pretty In Pink' line, which [uses] pink plastic beads on elastic for bracelets and necklaces." Brilliant also pointed to his firm's "Enchanted Bracelet" line, which also features plastic beads on elastic and is formatted to sell in 1.1-in. capsules.

Peter Becker of What's Up LLC echoes Brilliant's analysis about climbing sales at both the supplier and operator levels. "My perception is based on speaking with people and as a result of what happened at the show, and it would appear there's a lot more confidence on the part of operators," he said. "From what I'm hearing, sales have picked up in the first quarter of this year, and there are a lot of items out there that are selling."

An example of one of those hot items is What's Up's "LiveBold" bracelets. The silicone wristbands feature different sayings inscribed along the thin band. According to Becker, the "LiveBold" has proved so popular that What's Up is expanding the line with a Spanish version featuring a Spanish saying on one side and the English translation on the reverse.

Although suggested to vend at 50¢, "LiveBold" bracelets have been "emptying machines" at 75¢ and $1 price points, Becker reported. "The 'Live Bold' bracelets have enabled a lot of operators to move their price points up," he noted. "The increased price will always depend on the perceived value of the product. Right now, we're really focusing on the upper end of 50¢ items, which can garner a 75¢ vend in the right location."

Cardinal Distributing's Danny Pasz-kiewicz has also reported impressive sales in the capsuled merchandise category with both plastic and metallic products performing well. "Capsuled merchandise are doing very well for us , excellent , as a matter of fact," he commented. "The hottest thing we have at this point would be the 'Jelly Flingers.' They look like an octopus. The rubber wristbands, 'Power Bands,' have also been doing excellent.

"As far as jewelry goes," Paszkiewicz explained, "non-lead jewelry has been making a comeback. Now we're using a nickel base , it's more expensive and drives the price up, but it's well below government [lead] standards. The problem we have now is that we can't get it fast enough!"

Paszkiewicz, like Becker, has seen some premium or high-end 50¢ merchandise vend successfully at the higher price points of 75¢ and $1, as is the case with some of his hip-hop themed novelty jewelry lines, such as "Spinners."

These vend price increases reported by Becker, Paszkiewicz and others are occurring in selected markets with certain product lines. That is to say, while the number of operators instituting a full-fledged program of across-the-board price increases still remains relatively small, a growing number of operators seem to be experimenting with higher price points in a very targeted manner. Prompted by thinning profit margins due to the increased costs associated with merchandise and gas, coupled with an ever-growing selection of high-quality merchandise, these operators are able to effectively market at a $1 vend. Whether these targeted and still-largely limited efforts will evolve into a larger trend remains to be seen.

The problem, according to both operators and suppliers, is lack of a steady supply of high-end merchandise. It's the old "chicken and egg" scenario in which higher quality merchandise will successfully command a higher vend price, but that higher vend price needs to be in place in order to justify that merchandise being in the supply chain to begin with. Whether or not the current environment of rising costs will force the hand of both operators and suppliers is the real question.

LICENSED MERCH

One aspect of the capsuled merchandise arena that remains unambiguous is the position of licensed merchandise within the industry. Piggybacking on "brand" recognition, licensed merchandise has proven itself profitable in virtually every segment of bulk vending, including ball gum and flat vendibles. One leader in this trend is Tomy Yujin Corp., which has licensed some of the best-known brands in the youth demographic, including Disney, G.I. Joe and Barbie, among others.

These licenses, as TYC officials have pointed out in the past, prompt collectibility and repeat sales as young consumers return to the machines multiple times in attempts to complete their collections.

Yusuke Tokashiki, vice-president of licensing and business development for TYC is taking a cautious approach to market conditions when it comes to licensed collectibles. Has the market strengthened over the past year? "That's not too easy to answer," he replied. "The collectible market in general? If you mean the collectible market in the bulk vending industry, then my answer is yes and no.

"We can see the market has strengthened as the volume of our collections has increased," Tokashiki continued. "I believe the [number of] product collectors , or enthusiasts , have increased. But, the industry has a few issues such as the lead recall last year, and the reluctance of operators to move to $1 products. It does not seem it can be called 'win-win' as of yet."

Nevertheless, in following its strategy of obtaining both well-known licenses such as Disney properties and Winnie the Pooh as well as movie licenses, TYC is continuing to increase its profile within the bulk marketplace. Most recently, TYC introduced a series of figurines licensed from the upcoming movie "The Fantastic Four." The big-budgeted, special effects movie, which is licensed from the well-known comic book characters as well, reaches the market with an early positive "buzz." However, Hollywood licenses still remain a high-risk proposition that TYC has factored into its overall licensing strategy.

"The sales of movie property products are good as long as the movie is successful. That's why we intend to continue to obtain new movie licenses," Tokashiki explained. "But, conducting business only with movie licenses is too risky, as you can imagine. Some of them can flop. I believe having a good balance with other non-movie property characters is an important key. For example, Disney Princess, Winnie the Pooh and The Simpsons are always popular even though they are not movie properties. Overall, we intend to have good steady sales by extracting an advantage out of each property."

MICRO-MANAGING

What this adds up to, according to some operators, is the need for increased attention to detail when it comes to "programming" machines on a route. Not only do operators have to look at the potential of now getting a 75¢ or $1 vend for high-end merchandise in key locations, but also adopt a new strategy when it comes to buying product as well. "For the small operator, like me, more and more I'm buying product with specific locations in mind rather than my entire route," said one operator. "It's more work to micro-manage, but it pays off."